Banco Santander Kept as a Buy

We are maintaining our Buy on Banco Santander Central Hispano, S.A. (STD) as well as our $23 target price, reflecting Santander's low valuation relative to its strong growth prospects vis-a-vis global peers. Santander reported first quarter net earnings of 2.2 billion, up 24% year over year and modestly above our estimate due to a lower-than-expected tax rate.

We retain our 2008 EPADS estimate at $2.20, and initiating our 2009 estimate at $2.55. Results should continue to be driven by strong loan growth, particularly in developing markets, and improved efficiency. Recent acquisitions will aid growth, including ABN AMRO's Latin American operations, the continental European consumer finance business of the Royal Bank of Scotland (RBS), and certain GE Money units located in Europe and the UK. Santander recently raised its annual dividend 25%.

At its current price, Banco Santander trades at 8.0X the consensus 2009 earnings estimate, a 9% discount to the industry P/E median (versus a 19% discount at the time of our last report on March 4, 2008) as shown in the following table. Banco Santander's growth prospects are above average (15% compared to 11% for the industry median), as is its dividend yield (4.7% compared to the industry's 3.7%).

We also recognize that Santander's exposure to Latin America presents it with an above-average risk profile. Our $23 target price represents roughly a 9X multiple of 2009 estimated earnings of $2.55 per share, roughly in line with the industry median.

Target $83 on Buy-Rated CRM

We believe over the long term, Salesforce.com, Inc. (CRM), which consistently beats Wall Street expectations, will emerge as the leader in a potentially huge market for on-demand software. The business-software maker has had strong traction in the larger enterprise market and has partnered with Google (GOOG) to serve small businesses.

Although a relatively new entrant, Salesforce.com has built a strong customer base due to the quality of its product offerings over the past five years. It added more paying subscribers in the October quarter than its closest on-demand competitor has in its complete history, which is a remarkable feat.

In fact, Salesforce.com is well-positioned to see continued subscriber growth momentum for the next several years. A steady and gradual improvement in large deals, including recent ones like Accenture (ACN) and Merrill Lynch (MER), already brings the company higher revenue visibility than its peers.

We believe a price-to-sales multiple is an appropriate valuation metric for CRM shares, given the early stage of the company and its software-centric business. Traditionally, leading software providers trade in a range of 5x to 15x revenue.